Category Archives: Finance

HK stares at tourism abyss as funds keep flowing

Hong Kong remains China’s key gateway for foreign investment despite the protests, according to the latest data from Beijing. As SCMP reports, China received US$62.9 billion in foreign direct investment via Hong Kong in the first eight months of this year, accounting for 70 per cent of total inflows. The rise was even sharper once the monthly number for August was calculated: US$7.53 billion, up 29.2% from the same month last year.

It’s hard to blame or credit these flows on anything Hong Kong is doing, as Investment decisions into China are often months, if not years, in the planning. Still, the numbers might bring some comfort at a time when the tourism pillar of the economy is crumbling. 

According to this SCMP report, Causeway Bay is struggling, with one in ten shops standing empty and thousands of staff facing job losses. We think a very painful withdrawal experience lies ahead as the city is forced off the drug that it has been hooked on since 2003. Mainland tourists have other options, including Macau, and once mainland tariffs on imported goods start being completely repealed, they will likely have little reason to come back – even if the protests somehow start to subside.

Across the city, the hotel industry is reeling. But landlords appear to be doing what they do best: forcing management companies to let go of staff while they figure out the best way to reconvert the buildings into office space. And they are in the meantime looking to move their real-estate projects as fast as possible before prices start to fall off a cliff as the government strong-arms them into offering below-market discounts.

Hong Kong needs a big, new vision for its future.

HKMA chief unperturbed by short-sellers

After a weekend of chaotic scenes in Hong Kong, including fistfights between rival camps in the streets, Hong Kong’s outgoing monetary chief, Norman Chan, tried to present a picture of fortitude and calm to investors today. 

As SCMP reports Chan saying: “The financial market in Hong Kong is much bigger nowadays than at the time during the Asia financial crisis in 1998. The short sellers who want to attack the local currency would find they would need much more bullets to carry out the attacks, which would be too expensive for them to so. As such, the public does not need to worry about the short sellers’ attack to the peg as they would not be able to repeat what the short sellers were doing during the Asian financial crisis.”

He does have a decent argument. The Exchange Fund stands at HK$4.138 trillion (US$528.73 billion), 4.5 times more than the level at the end of 1998, when it was last attacked by speculators in the wake of the Asian Financial Crisis. He also says there is no evidence of a major movement of capital out of Hong Kong. 

However, one has to wonder why Chan is bothering to comment at all, if the government’s ammunition is so extensive that the public need not worry about it. While Chan says there have not been significant short positions taken against the HK dollar recently, is he seeing something he doesn’t like in the way local depositors are switching into US dollars? We will just have to wait and see.

Guangdong to launch its own STAR Market

Not usually one to play catch-up to Shanghai, Guangdong has announced it is getting its own Science and Technology Innovation Board, otherwise known as a STAR Market. 

Shanghai launched the first STAR Market on July 22. Its first day of trading made national headlines as share prices soared, but they came down in the subsequent days as traders locked in early profits. 

Now, it has been decided that Guangdong is following suit, under guidelines released by the central government earlier this year aimed at boosting innovation by making it easier for small and micro enterprises to raise equity on regional exchanges.

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Another GBA Innovation 100 ETF approved

The GBA Innovation 100 ETFs are piling up. Southern Asset Management became the only Shenzhen-based fund manager so far to be approved to launch an ETF based on the Greater Bay Area Innovation 100 Index. Another fund manager from Beijing was approved for the same type of ETF fund today, and the two follow GF Fund Management and ICBC-Credit Suisse Fund, which obtained their approvals earlier of the month. Another 10 are awaiting approval.

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Shenzhen Capital turns 20

Shenzhen Capital Group has just celebrated its 20th anniversary. With RMB347.2 billion of funds under management, the state-owned company, which comprises a diverse range of fund types, can boast a pretty impressive track record:

  • Invested RMB45.2 billion in 1,016 portfolio companies;
  • 151 of which have gone on to list on 16 capital markets worldwide;
  • Accounts for 12.4% of the value of all companies listed on A-share ChiNext; 
  • Compound annual growth rate of 20%.

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PBOC will sell more bonds in HK

With a president whose finger is never far from the Tweet button, it’s best to be prepared. The People’s Bank of China said today it will sell RMB30 billion (US$4.3 billion) of short-term yuan-denominated securities in Hong Kong next week, signaling its plan to absorb offshore liquidity and cushion against further depreciation of its currency versus the US dollar, which shocked markets yesterday by breaking through the 7-to-1 level and resulting in the US labeling China a currency manipulator.

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Shenzhen’s financial industry surges

Shenzhen’s financial industry had a strong first half, with growth across every major sector posting double-digit gains. 

The only area that didn’t see strong growth was the one that the government didn’t want to see grow strongly: its own. The city’s tax revenue from the financial industry rose just 2% to reach RMB89.4 billion, thanks to a series of tax reforms that reduced tax bills across the city. Still, finance accounted for 24.8% of the city’s total tax revenues and is still the leading contributor to the city’s coffers.

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Shenzhen Capital Group debuts US$291m healthcare fund

Shenzhen Capital Group, a state-owned venture capital firm, announcedlast week that the company has launched its debut healthcare fund to raise over RMB2 billion (US$291 million).

The target amount of the first round of fundraising is RMB800 million ($116 million). The debut healthcare fund – Shenzhen Hongtu Healthcare Private Equity Fund – has already secured capital commitments from state-owned Shenzhen City Guidance Fund Investment, PingAn Real Estate Investment, ICBC, Chinese private equity firm Before Capital, and Kunpeng Capital.

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Greater Bay X ‘scalerator’ launched

Greater Bay Ventures has launched its GreaterBayX “scalerator” program, focused on urban mobility and smart city businesses. Founded by entrepreneur Tony Verb, the growth stage, cross-border accelerator program focuses on technology, innovation and IP that have mobility-related applications under the “urban tech with impact” theme. 

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